Investment Implications of the Actuarial Design of Life Insurance Products: Comment

Abstract

Professor Hickman has rendered a signal service in his article.' In effect, he brings to the attention of the academic community the fact that the changing nature of the life insurance business requires reexamination of the traditional assumptions underlying actuarial advice to the investment officers. This fact, however, has not escaped the attention of the practical operators in the business, including many state regulators. The problem is to incorporate into life insurance theory the type of development described under the heading of Decline of Guarantees (pp. 580-582), for which the life insurance business itself-including its actuarieshas meanwhile found reasonable pragmatic solutions. I cannot hope to do so in this brief comment, and note with some dismay that Professor Hickman doubts that the immunization formulas and other elegant theoretical schemes he reviews will stand the test of practicality even for traditional life insurance lines. When it comes to the very practical current questions, however, Hickman's observations, astute as they are, need just a bit more sharpening up to describe the actual problems life insurance companies